Organic market report 2013

Published with the support of Soil Association South Plaza | Marlborough Street | Bristol BS1 3NX T 0117 314 5000 | F 0117 314 5001 www.soilassociation.org Registered charity no. 206862

Soil Association Scotland Tower Mains | 18c Liberton Brae | Edinburgh EH16 6AE T 0131 666 2474 | F 0131 666 1684 www.soilassociationscotland.org Registered charity no. SC039168

©Soil Association 2013

2 SOIL ASSOCIATION Foreword

In a prolonged economic downturn it is hardly SUPPLY SHORTAGES THREATEN GROWTH surprising to find subdued sales of a wide variety Some have turned their predictions of goods and services. The UK organic sector is not of falling demand into a self-fulfilling prophecy by immune to the challenges of the wider financial dramatically cutting organic ranges and shelf space, environment. reducing availability for shoppers who want to carry on buying. This has triggered disproportionate cuts Despite a 1.5% decrease in sales overall, however, in production of some commodities, such as eggs, there are areas of significant growth for organic causing supply shortages. It is important for all products. These include parts of the dairy sector, retailers to work more closely than ever with their large specialist retailers, home delivery, non-food organic suppliers to ensure the higher farmgate products and catering. This report also identifies prices, better planning and decent forward contracts a number of important trends, opportunities and that are needed to restore producer confidence challenges for the UK organic market: and safeguard future supply.

ONLINE AND INDEPENDENT SUCCESS OUR GOVERNMENT IS OUT OF STEP Organic shoppers are increasingly choosing the European sales of organic products have increased convenience and variety offered by online shopping by more than 25% since the start of the global and specialist stores over the inconvenience and economic downturn in 2008. Our government frustration of finding more limited ranges and stock has much to learn from its European counterparts, at many supermarkets. Multiple retailers will need who back the organic sector strongly through a to ensure full ranging of organic products and invest combination of environmentally based producer in their own-label ranges (whose sales fell by 11.2% support, firm targets for public-sector procurement in 2012) if they are to regain ground from the leading of organic, and investment in promoting organic home-delivery specialists Ocado, Abel & Cole and products. Riverford (whose organic sales increased by 10.3%). Despite the relative neglect of our policy makers YOUNG SHOPPERS ARE LEADING THE WAY and some supermarkets, there is much cause for The ‘Jamie Generation’ of ethically aware consumers optimism in the success of specialist retailers, the under 35 significantly increased their average enthusiasm of young shoppers and the long-overdue spending on organic products in 2012, pointing questions being asked about our reliance on cheap, to a healthy future for the organic market. low-quality, untraceable food in the wake of the horsemeat crisis. It may be difficult to anticipate THE CATERING MARKET IS OPENING UP precisely when the UK organic market will return to Organic catering and restaurant sales rose by growth, but we can predict increasingly confidently 1.6% in 2012, despite a general tendency to eat that it will do so. out less in tough economic times. The Food for Life Catering Mark is proving a key factor in opening up opportunities for organic producers: the number Rob Sexton of meals served under the scheme increased by Chief Executive, 40% in 2012 to 140 million. Soil Association Certification Ltd

O R G A N I C M A R K E T REPOR T 2 0 13 3 Overview

THE UK AT A GLANCE

Land Sales Businesses 656,000ha £1.64 billion 6,929 -8.7% -1.5% -4.9%

€45.8 billion global sales ONLINE SALES

€21.5 billion European sales £4.1m £1.64 billion A WEEK 2005 2008 2012 OCADO SALES UP 6.4% 4TH LARGEST ORGANIC RETAILER TOP GLOBAL MARKETS WITH 1,400 ORGANIC LINES

USA GERMANY FRANCE €21 billion €6.6 billion €3.7 billion

4 SOIL ASSOCIATION TEXTILE SALES UP 10%

HEALTH & BEAUTY SALES UP 5.6%

BOX WHY BUY ORGANIC? CATERING SCHEME & RESTAURANT & HOME SALES UP DELIVERY SALES UP TASTE 1.6% ‘GREEN’ 35% 4.4% 44%

HEALTH 55%

O R G A N I C M A R K E T REPOR T 2 0 13 5 The organic consumer

Four out of five households buy organic products (80.3%). More than half of shoppers (55%) say Organic sales they believe it is important to do so, while only by social 6% think shopping organic is ‘not at all important’. grouping A B 2012 38.2% HEALTHIER, GREENER, TASTIER C2 D E Health, caring for nature/the environment and taste 29.8% are the three most significant motivations for buying organic products. More than half of organic shoppers cite healthy eating (55%) and avoiding chemical C1 residues (53%) as reasons to purchase. Nearly half 32% are motivated by care for the environment and nature (44%), while around a third mention the taste of organic food (35%) and animal welfare Source: Kantar Worldpanel (31%). Taste and environmental factors appear to be less influential than they were two years ago, but health motivations have remained constant. Spending frequency of organic buyers 2012

YOUNGER SHOPPERS LEAD THE WAY Homes The youngest organic shoppers (under-28s) are buying Spend spending more on organic products than they did a year ago. Retired people and ‘empty nesters’ still account for almost half of all UK spending on organic products (48.6%) but the ‘Jamie Generation’ of ethically aware under-35s (16% of sales) significantly increased their average spending in 2012. Leading London retailer Planet Organic says students are an increasingly important part of its customer base, accounting for 10% of all purchases in its five stores. Student purchases increased by 15% in 2012, well above the 5% increase in transactions for the stores as a whole.

REAL FOOD, REAL QUALITY Organic consumers are much more interested in food quality, provenance and buying local than the average shopper, and more than twice as likely to also buy Fairtrade products. In-depth research suggests that organic consumer motivations can be 52 weeks w/e 23 December 2012. Source: Kantar Worldpanel grouped together into four broad and sometimes

6 SOIL ASSOCIATION Middle-income Ethically aware Britain’s share under-35s of organic increased their spending has average spend decreased

overlapping areas of motivation: living healthily, being a global citizen (or ‘doing the right thing’ Top reasons for buying organic from an ethical perspective), preferring ‘real food’ main reason all reasons (predominantly meaning natural and unprocessed) Healthier for me and my family and seeking out quality (some choose organic 25% 55% options for treats or ‘special occasion’ cooking). Fewer chemicals 17% 53% THE COMMITTED CORE Natural and unprocessed More than three-quarters of households buy organic 12% 52% products but sales are dominated by a small core Better for nature/the environment of committed shoppers. A third of organic shoppers 6% 44% (33%) account for well over three-quarters of Safer to eat spending (85%), while just 6% of shoppers are 7% 39% responsible for half of all sales (51%). The most Organic food tastes better committed buyers are aged 28-44: this is the age 11% 35% Organic farming is kinder to animals bracket where organic products attract the highest 10% 31% spend compared to the national average for all More ethical age groups. 3% 29% No GM ingredients THE SQUEEZED MIDDLE 4% 28%

Middle-income Britain’s share of organic spending October 2012. Source: Leapfrog Research/Organic UK has decreased in the past year. The proportion of spending attributed to middle-income C1 shoppers, which includes professionals in administrative and clerical roles rather than management positions, Share of organic sales within Great Britain has decreased from 34% to 32%. The implication is that this is the group which is tightening its belt most in the face of austerity cuts and tax increases. Scotland Lancashire Yorkshire North east 6.9% 6.7% 5.8% 2.7% REGIONAL HOTSPOTS Organic products are most popular in London, 12.9% the south east and the east of England. These are the regions where shoppers spend above the national Wales Midlands East England average on organic food and drink. London alone 8.6% 8.1% accounts for nearly a third of organic sales nationally (32%), with significant spending online. South west London 3% 32.2% 13.1%

Source: Kantar Worldpanel South

6 SOIL ASSOCIATION O R G A N I C M A R K E T REPOR T 2 0 13 7 The UK organic market

The organic market is subdued on the high street but booming online and in large specialist retailers. UK sales of organic products 1995–2012 Organic shoppers are increasingly choosing the £2,000m convenience and variety offered by home delivery and specialist shops over the inconvenience and £1,750m frustration of finding more limited ranges and £1,500m stock at many supermarkets. £1,250m The three leading organic home-delivery specialists £1,000m (Ocado, Abel & Cole and Riverford) increased their £750m combined turnover by 10.3% in 2012, while the seven leading multiple retailers saw their organic £500m sales fall by 3.8%. The organic market as a whole £250m contracted by 1.5% to £1.64 billion.

1995 2000 2005 2010 Online purchases now represent 10.1% of spending through the major retailers on organic Source: Soil Association, Organic Market Report products, compared to just 5.7% of all food and drink spending. The online boom means that shoppers now spend £4.1 million on organic Share of the UK organic market 2011–2012 products online every week. Multiple retailers In the supermarkets the most popular organic 2011 £1,189.6m 2012 £1,161.4m -2.4% purchases are dairy and ‘chilled convenience’ products (31% of spending) and fresh fruit and Box schemes/home delivery/mail order vegetables (23%). Between them these two 2011 £167m 2012 £174.3m +4.4% groups of products accounted for 54 pence in every pound spent in 2012. Farm shops and famers’ markets 2011 £48.1m 2012 £41.3m -14.1% The most encouraging trends are in the dairy sector, where sales of yoghurt and cream increased Catering by 9.9% and 14.1% respectively and milk sales 2011 £15.7m 2012 £15.9m +1.6% began to grow again towards the end of the year. Yeo Valley Organic, the biggest dairy company in the Other independent retailers market, increased its sales by 6.6% and is predicting 2011 £246.6m 2012 £249.1m +1% further growth in 2013. Rachel’s Dairy increased its Total sales by 15%, buoyed by particularly strong growth in demand for its large fruit yoghurts. 2011 £1,667m 2012 £1,642m -1.5%

Source: Soil Association

8 SOIL ASSOCIATION As shelf space for organic is cut by the Branded sales supermarkets are up 2.2% online sales but own-label are booming sales declined by 11.2%

Share of the UK organic market 2004–2012 Multiple retailers Ocado is the striking success story among the major retailers in 2012. The online grocer increased its 2004 2008 2012 organic sales by 6.4%, overtaking and 75.3% 73.1% 70.7% to become the UK’s fourth-largest organic retailer. It extended its range of fresh produce and anticipates further growth of 10-15% in 2013.

Multiple retailers Of the 1,400 organic products available from 2012 Ocado’s website, around 10% are branded products 2004 2008 10.6% from Daylesford and Laverstoke Park. own- 2.6% 8.1% label organic products account for eight out of ten of Ocado’s biggest-selling organic lines. Waitrose Box schemes/home delivery/mail order itself also increased its organic sales, by 1.1%. Its results were buoyed by the increasing popularity 2004 2008 2012 of the Duchy Originals from Waitrose range. 22.1% 18.8% 18.7% The only other major retailer reporting growth is Morrisons, supported by its expansion in the south Other independent retail of England. It has also reviewed its organic offering Source: Soil Association and has just relaunched its M Organic range. There is a striking contrast between sales of organic brands in the leading supermarkets (up 2.2% in 2012), and the performance of own-label products (down 11.2%). Product shares of the In this context it is encouraging to see Morrisons UK organic market 2012 2011 making a renewed investment in its own-label range. and change in sales value* share to 2012

Dairy/chilled convenience 30.8% -4.8% Ocado’s success reflects a broader trend of organic shoppers looking increasingly to specialist retailers Fruit, vegetables and salad 22.8% -7.7% and online shopping as organic ranges and shelf Baby food 13.9% -2.6% space on the high street are cut by some super- markets. Organic sales across the multiple retailers Beverages 6% -6.5% fell by 2.4% to £1.16 billion in 2012, while their Fresh meat 5% -5.9% online sales increased by 4.1%. Fresh poultry and game 1.6% -29.9% has introduced a new organic zone on its Fresh fish 0.6% +1.4% website and is piloting an online home-delivery

*Multiple retail sales only Sources: Kantar Worldpanel; Soil Association box scheme in London, while Sainsbury’s saw its online organic sales increase by a remarkable 48%.

8 SOIL ASSOCIATION O R G A N I C M A R K E T REPOR T 2 0 13 9 The UK organic market

Amazon has enlisted new organic suppliers and Multiple retailers share of 2011 offers a wide range of non-perishable products. organic sales 2012 sales organic to 2012 The protracted economic downturn has undoubtedly Tesco 1% -6.9% dampened demand for organic products, but a Sainsbury’s 2% -1.1% disproportionate reaction by some supermarkets has depressed sales further by reducing availability Waitrose 4.8% +1.1% for those who want to continue to shop organic. Ocado 9% +6.4% This not only damages the market in the short term Asda n/a -10% but also affects the prospects for future growth, by triggering reduced production. Morrisons 0.5% +3.5% Co-operative 0.4% -9.3% The egg market provides a stark example. Organic egg production fell by 9.7% in 2011, partly as a Marks & Spencer 1% -20% consequence of retailers reducing orders and shelf Sources: Kantar Worldpanel; Soil Association space. Sales of organic eggs were then held back in 2012 by supply shortages in some quarters. Ocado reports that it could not source enough organic eggs for its customers in 2012, and Waitrose is now Ocado 100% expressing similar concerns about the availability Asda 8.5% of UK-produced eggs, beef and salmon in 2013. Tesco 8.4% Sainsbury’s 7% Waitrose 3.5% Independent retailers Source: Soil Association There was a 0.7% increase in sales through independent outlets, encompassing box schemes, mail order, farm and health-food shops, farmers’ Own-label share of organic sales 2012 markets and catering. The independent sector is now valued at £480.6 million.

The big winners were large specialist retailers in M&S Sainsbury’s Morrisons Waitrose urban areas, well placed because of their location 100% 69% 63.7% 60.5% and their extensive ranges to pick up custom from the supermarkets. reported 9% annual growth in its most recent UK results, and Tesco Ocado Co-op opened a seventh store in Cheltenham in November 60% 50% 47% 2012. Planet Organic increased sales by 10% and predicts further growth of 8% in 2013, while Source: Soil Association As Nature Intended is also reporting strong growth.

10 SOIL ASSOCIATION Some smaller farms and farm businesses are struggling to weather the The Food economic storm for Life Catering Mark is helping boost the catering sector

Unicorn Grocery, a large workers’ co-operative in Manchester, put its 10% increase in turnover Restaurants and catering down to a combination of reduced organic ranges The Soil Association calculates that organic sales in the supermarkets, a trend towards cooking from through restaurants and catering rose by 1.6% in scratch instead of eating out, and good value for 2012. The value of this sector is now £15.9 million money as a result of buying directly from producers – a little under 1% of the UK organic market. where possible. Interest in organic products continues to be BOX SCHEMES AND HOME DELIVERY stimulated by the Food for Life Catering Mark, Box scheme, home-delivery and mail-order sales the UK’s fastest growing food service best-practice increased by 4.4% to £174.3 million. This third scheme. Over 140 million Catering Mark-accredited successive year of healthy growth was spearheaded meals were served in 2012, a 40% increase on the by Abel & Cole and Riverford, the two leading previous year. Twenty per cent of England’s schools independent box schemes, whose turnover are now part of the scheme, along with the UK’s increased by 20% and 8% respectively. largest chain of nurseries and 15 universities.

Abel & Cole’s weekly deliveries reached the In August 2012 there was a significant breakthrough 50,000 mark, increasing by a quarter. It attributes in the business sector, as Pearson became the first its success to improved service and product quality, FTSE 100 company to achieve the Catering Mark. allied to new marketing methods. Riverford cites the introduction of new products and increased The Catering Mark is gaining momentum in deliveries as the main factors behind its growth. Scotland, supported by funding from the Scottish Government and the European Agricultural Fund for The picture was less healthy for the smallest Rural Development – in 2012 the number of accredited box schemes, whose sales dipped. These small meals served rose to 3.5 million. In Wales over a operators tend to be isolated from the urban million Catering Mark meals were served through hotspots of organic shopping and lack both the seven institutions: one hospital, four universities range of products offered by their larger rivals and two local authority school meal contracts. and the marketing resources needed to attract new customers. On the high street one of the companies champion- ing organic sourcing is McDonald’s, which uses UK- FARMERS’ MARKETS AND FARM SHOPS produced organic milk in all its tea and coffee and in Some small farms and farm retail businesses are children’s Happy Meals. In 2012 the company used struggling to weather the economic storm. Sales 21.1 million litres of organic milk, a 5.5% increase of organic products through farmers’ markets and on the previous year. farm shops fell by 14.1% in 2012, reflecting the closure of some businesses while others achieved modest growth.

O R G A N I C M A R K E T REPOR T 2 0 13 11 Sales of Soil Association-certified The UK organic textiles 2006–2012 £15m organic £12m £9m market £6m

2007 2008 2009 2010 2011 2012

Source: Soil Association Certification

Non-food products vintage prints to mark the 50th birthdays of both Carnaby Street and the Rolling Stones. A notable TEXTILES smaller-scale success was wool manufacturer Curlew Soil Association Certification, the UK’s leading Weavers, which doubled its sales in 2012. certifier of organic products to Global Organic Textiles Standards (GOTS), saw the turnover of HEALTH AND BEAUTY its textile licensees (business to business as well The Soil Association calculates that UK sales of as retail) increase by 10%. The Soil Association certified organic health and beauty products increased approved inputs scheme for dyes and printing inks by 5.6%, to £31.8 million. is growing steadily, with ten new companies joining in the past year. The number of GOTS-certified Neal’s Yard Remedies, the market leader and Soil textile facilities globally reached 2,995, a 10.4% Association Certification’s largest health and beauty increase on the previous year. licensee, increased its organic sales by 12.9%. It opened a new store in Hereford, bringing its total The wool market is also buoyant: in 2011-12 sales to 40 in the UK and 83 globally, and added 20 of organic wool through the Wool Board increased in new organic lines to its range. volume by 8.5% to 215,000kg and in value by 25%, bolstered by a 15% increase in the price per kg. Three of the top five Soil Association Certification licensees are specialist ingredients suppliers for The latest edition of Textile Exchange’s Organic personal care products – Statfold Seed Oil, Azelis Cotton Farm and Fiber Report, published in mid-2012, UK Life Sciences and Inovia International. The three calls for industry action to increase global organic biggest consumer brands after Neal’s Yard Remedies cotton production, which fell by 37% in 2010-11 are Essential Care, intimate lubricant maker Yes and as a result of seed shortages, the advance of GM fast-growing Pai Skincare, which more than doubled cotton, tougher traceability rules in India and some its turnover in 2012. companies switching to lower standards of production. In contrast, Textile Exchange says the global market Among the new products on the market are the for organic cotton grew by at least 10% in 2011-12. Inlight skincare range (already available in nine The Soil Association launched a campaign in countries, and produced through a partnership September in partnership with GOTS to encourage between UK organic pioneers Mariano and Loredana consumers, brands and manufacturers to ‘cotton on’ Spiezia and the Centre for Homeopathic Medicine to organic (see www.cottonedon.org). in Naples) and the newly certified Nourish skin range with innovative active ingredients from Soil Association Certification’s largest textile licensee Natural Products Factory. is Continental Clothing, which specialises in designing and manufacturing items to sell wholesale to the imprintables industry. Its turnover grew by 35% in 2012, boosted by range expansion, a doubling of warehouse capacity and high-profile opportunities such as a two-month promotion with organic

12 SOIL ASSOCIATION Organically managed land in the UK 2003–2012

750,000ha

700,000ha

650,000ha

600,000ha

2003 2006 2009 2012 Source: Defra

It has been a challenging year for nearly all farmers, organic and non-organic. High feed and fuel prices Distribution of UK total have compounded the impact of the worst weather organic land 2012 656,000ha conditions for many years. (incl. 37,000ha in conversion) First the dry start caused germination problems with spring crops. Then the wettest conditions for many Scotland years took their toll on crop yields and quality, left 170,000ha many pastures in need of repair and increased the (5,000ha) incidence of diseases such as fluke.

In spite of these challenges, there are good reasons for organic producers to be optimistic about the future. The intensification of interest in where our food comes from in the wake of the horsemeat crisis can only serve to reinforce a long list of underlying positives: increased average profitability for organic N. Ireland enterprises in the past five years, increased spending 12,000ha among younger shoppers, rising farmgate prices (4,000ha) England as supply tightens, the opening up of the catering 351,000ha market, the strength of specialist retailers, unerring (25,000ha) market growth in the rest of Europe and the boom Wales in online sales. 123,000ha (3,000ha) What producers need in the current climate of uncertainty over CAP reform and lukewarm support Source: Defra from supermarkets is an injection of certainty and commitment from both policy makers and retailers to ensure that production levels stabilise and supply Percentage Total UK shortages do not stifle a return to growth. change for agricultural area organic land that is organic 2011 to 2012 2012

Organic land and UK -8.7 UK 3.8% organic producers England -7.3 England 3.9% Wales +3.4 Wales 8% In July 2012 the UK’s organic land area was reported Scotland -10.1 Scotland 3% to be 656,000 hectares (based on data to the end N. Ireland -20 N. Ireland 1.2% of 2011). This is an 8.7% decrease from the previous Source: Defra Source: Defra year, and constitutes 3.8% of the agricultural land area.

O R G A N I C M A R K E T REPOR T 2 0 13 13 Numbers of organic producers and processors of their support payments under the Organic Farming fell by 4.9% to 6,929. Farmers and growers account Scheme (OFS) – by reverting to non-organic production. for 64% of this total and processors 33%, with a small number of enterprises that encompass both Producers experienced a difficult year: severe farming and processing (3%). The biggest reductions weather affected crop yields and livestock quality, in numbers were seen in Scotland and in the and farmgate organic premiums were limited. Yorkshire and Humberside region of England The main organic poultry processor is currently (both down 7.9%). selling 42,000 birds or bird equivalents per week, an indicator that the poultry sector has stabilised As well as a year of unforgiving weather, 2012 following a big drop in demand in 2010 and 2011. was a year of numerous company mergers, business Numbers of organic beef and sheep producers integrations and buyouts. These seem to have also remain constant. provided a measure of stability to national trading in key commodities. In the dairy sector the Arla The most positive news is in horticulture, where Group merged with Milk Link, while in red meat farmers selling directly to the public are reporting Graig Producers and Meadow Quality merged. growth and a number of new home-delivery box In the cereals sector Norton Organic Grain joined schemes have been established. The number of forces with Saxon Agriculture. organic milk producers remains small, however, with prospective new entrants discouraged by a modest price premium and high feed costs. National trends SCOTLAND ENGLAND Scotland’s organic land area decreased by 10.1% The land area registered as organic decreased by in the year to January 2012, while producer numbers 7.3% to 351,000 hectares – 3.9% of England’s fell for a third consecutive year. Some established agricultural land. There is wide regional variation, farmers have expanded but very little new land with organic land peaking at 9.7% in the south west has entered conversion. and at its lowest in the east of England, the East Midlands and Yorkshire and Humberside (all 1.2%). The severe wet weather made life very difficult for almost all farmers, particularly over the crucial New land entering conversion dropped by 16%, sowing and harvest periods. Agricultural output fell, reflecting the impacts of improving farmgate prices input costs rose and productive capacity for 2013 in non-organic agriculture, uncertainties over CAP was undermined. reform and government support, and varying retailer commitment. Finished cattle prices and organic farmgate premiums have risen steadily in the past 12 months but the NORTHERN IRELAND premium for organic lamb is lower than a year ago, The organic land area shrank by 20% in the year despite consistent demand. Preliminary findings from to January 2012 as producers responded to tough the ninth annual survey of the Scottish Government- economic conditions – and in some cases the end funded Organic Market Link project suggest production

14 SOIL ASSOCIATION O R G A N I C M A R K E T REPOR T 2 0 13 15 UK organic production: sales and agricultural output 2011 to 2012

Cereals: all output -7.7% Pork sales -29.7% output +11.1% Cereals: bread sales +1.5% Poultry sales -29.9% output -26.7% Horticulture sales -7.7% output -10% Eggs sales -29.7% output -21% Beef sales -1.1% output -4.4% Milk sales -4.4% output -15% Lamb sales -2.2% output +18.4% Fresh fish sales +1.4% output +10 %

Sales source: Kantar Worldpanel. Figures for arable and horticulture represent the land area under organic production at the start of 2011, compared to a year previously. Figures for all the other categories represent volume of production. Sources: Defra (arable, horticulture, eggs); Soil Association abattoir survey (meat categories); Organic Milk Suppliers’ of finished cattle will be slightly lower in the Sector by sector 2012-13 marketing season, while lamb and arable production are set to contract by over 20%. ARABLE Arable farmers were faced with high disease levels, The Scottish Government has continued to be poor seed quality and a shortage of winter seed. supportive of Scotland’s organic sector through Yields were generally around a third below average, its Organic Futures action plan, and is planning although some spring wheat achieved good protein to launch new support measures in the summer. levels, above 12%. Demand was strong for nearly all crops, with wheat prices increasing by 28% WALES over the year. The exception was oats, where a The organic land area in Wales grew by 3.4% in combination of residual crops from 2011, imports the year to January 2012 but is set to fall when the and an expanded UK growing area dampened the 2012 figures are published. Under 3% of the Welsh market. Export trade was significantly reduced. organic land area is in conversion, reflecting reduced interest from new applicants because of challenging HORTICULTURE market conditions and uncertain political support. Horticulture experienced yield reductions in the 15-50% range and farmgate prices rising by November’s annual producer survey by Organic 10-20%. Pests such as leek moth and cabbage Centre Wales indicates that Welsh organic livestock whites were reduced but slug numbers rocketed. and dairy production increased in 2012, delivering Supermarket sales have continued to decline but about 7,500 finished beef cattle, 210,000 finished demand from the biggest box schemes was strong. lambs and 80m litres of milk. But large numbers Some growers have ceased organic production after of organic lambs (45% of finished, 80% of stores) three poor seasons in five years but the long-term and store cattle (45%) were sold as non-organic – prospects still look positive. Much depends on a reflection on flat demand and small organic whether growers can secure the markets and premiums. prices they need to keep growing organically.

Producer confidence varies significantly between BEEF AND LAMB sectors. Around 60% of finished cattle producers Beef and lamb producers had to contend with high are confident that current prices are high enough feed prices and cheap imports. Cattle supplies were to continue beef production but only 23% of short throughout the year as farmers looked to sell finished lamb producers feel likewise. Horticultural their animals as store cattle rather than incur high and egg producers are more confident than a year feed costs. Farmgate prices for organic beef increased ago, whereas milk producers have become less by 8% to £4.30/kg, with premiums constant around optimistic about continuing production at current the 65-70p/kg mark. Liver fluke and grass quality prices. In recent visits to a wide range of organic problems delayed lamb production by up to two farms and businesses, Organic Centre Wales found months. New Zealand lamb was available at prices that most in the sector believe the worst is behind 30% lower than in 2011, pushing down prices for them – and a number are reporting significant UK producers. Farmgate prices for organic lamb fell increases in sales. to as little as £3.60/kg in the winter months but

O R G A N I C M A R K E T REPOR T 2 0 13 15 a recovery in the second half of the year saw an key factor affecting the organic sector as shoppers organic premium of 40p/kg restored. tighten their belts in the economic downturn. Sales have held up better among retailers whose customer PORK base is more affluent. Production will only pick up Pork producers saw their sales in established organic if there is a clearly demonstrated lift in demand, marketplaces grow, but supermarket sales fell by backed by fresh commitment from the retailers nearly 30%. Production fell by 11% in the year and sustainable prices for producers – something to January 2012 and is set for a further significant that seems to be an elusive combination in the reduction. The generally poor economic outlook current climate. and high feed prices sent 30% of UK organic pig producers scurrying into other forms of business. MILK Core producers have stuck at it, reducing their costs Milk sales fell by 4.4% in volume terms over where possible, but there is little scope for the sort the year but Nielsen Scantrack data show a of price increases needed at every link in the chain 0.5% increase in market value. This reflects more to help revive the sector. favourable farmgate prices, which have gone some way towards compensating producers for lower POULTRY demand. Some retailers have reduced their organic Feed costs continued to rise in 2012 and feed ranges in response to the economic downturn, and quality was variable at best, contributing to an this has put the brakes on the market. It has not increase in retail prices that affected sales volumes helped that milk remains a key category for super- for much of the year. Despite this, sales have market price wars, with reduced non-organic prices recently levelled off and there are some green putting additional pressure on organic sales early in shoots of recovery in consumer demand. Retailers 2012. Encouragingly, however, sales volumes started seem to be willing to promote organic chicken again, to grow again in the last five months of the year and increases in shelf space look likely to lead to and market value increased by 1.5% year on year. better sales. The increased need to ‘bed up’ organic birds because of the recent cycle of wet summers SALMON and cold winters has come at a time when suitable Salmon producers report a broadly positive year, bedding material is expensive and in short supply. despite problems with sea lice and amoebic gill It is essential, however, to ensure good house disease. Production is on the increase both in the and range conditions that meet industry ‘welfare UK and elsewhere in Europe, and UK supermarket outcome indicators’ and consumer expectations. sales increased by 1.4%. Aquascot is planning to increase production by 27% in 2013 in response EGGS to increased demand from Waitrose in particular. Egg producers saw supermarket sales drop by Recent industry investment has benefited fish nearly 30%. Some retailers contributed to the welfare by improving feeding systems, wrasse fall in sales by reducing shelf space and availability, management and disease control. Farmgate prices leading to supply shortages in some quarters. Egg reached as much as £6.40/kg during the year, sales as a whole have not fallen but free range sales mainly because of high prices for feed that can have stopped growing, suggesting that price is the account for up to 70% of production costs.

16 SOIL ASSOCIATION Global sales of organic products 2002-11 The $60 billion global $45 billion $30 billion context $15 billion

2008 2009 2010 2011 2012

Source: Organic Monitor

Global sales continue to rise. Organic Monitor Demand for organic products is dominated by estimates that organic food and drink sales North America and Europe, which together account worldwide reached almost $63 billion (more than for more than 90% of sales. In 2011 the countries €45 billion) in 2011 – a 25.1% increase since the with the largest organic markets were the United start of the global economic downturn in 2008. States (€21 billion), Germany (€6.6 billion) and France (€3.8 billion). The highest average annual According to the latest figures collected by the consumption per person was in Switzerland Research Institute of Organic Agriculture (FiBL) and (€177), Denmark (€162) and Luxembourg (€134). the International Federation of Organic Agriculture The highest market shares of the food and drink Movements (IFOAM), organic farming is practised in market for organic products were in Denmark, 162 countries. In 2011 37.2 million ha of farmland Switzerland and Austria. were managed organically, and organic farming had a 0.86% share of agricultural land among the countries THE AMERICAS included in the survey. About another 32.5 million ha The North American organic market is the world’s are organic wild collection areas and non-agricultural biggest, with large companies dominant throughout land, giving a total organic area of 69.7 million ha. the supply chain. The organic land area is 2.7 million ha, and the market is worth €22.9 billion. Australia, Argentina and the United States are the countries with the most organic land, while Sales of organic products in the United States the Falkland Islands (35.9%), Liechtenstein (27.3%) grew by 9.4% in 2011, to €21 billion, and now and Austria (19.7%) lead the way in terms of the account for 4% of food and drink sales. US export proportion of land under organic management. opportunities for Europe’s organic sector – including A third of all organic farmland is in Oceania UK companies – were boosted in June 2012 when (12.2 million ha), with 10.6 million ha in Europe, EU organic standards were recognised as equivalent 8.4 million ha in Latin America and 2.8 million ha to those in the US, removing the need for separate in Asia. certification for the US market.

Canada UK Germany 4% 4% 14% France Switzerland 8% 3% Italy USA 3% 44%

Leading markets for organic food worldwide (% of global sales) Rest of the world Source: FiBL-AMI-IFOAM Survey 2013, based on data from government bodies, the private sector and market research companies 20%

O R G A N I C M A R K E T REPOR T 2 0 13 17 European sales of organic products 2004-11 The €20 billion global €15 billion €10 billion context €5 billion Europe wide EU only

2004 2006 2008 2010

Source: FiBL-AMI Surveys 2006-2013

Latin America, with 8.4 million ha of organic OCEANIA farmland, is an important producer and exporter The market for organic products in Australia, of organic products. Its consumer markets are New Zealand and the Pacific Islands is relatively developing too: Brazil has the largest in the region, small. The continent has about a third of the with growing consumer awareness fuelling growth. world’s organic land but its share of global sales is only about 2%. Australia and New Zealand EUROPE are particularly important producers, exporting Europe is a large consumer and producer of organic significant volumes of organic beef, lamb, wool, foods. Organic farming accounts for 2.2% of kiwi fruit, wine, apples, pears and vegetables. European farmland, and 5.4% of farmland within Asia is the major destination, followed by Europe the EU. and North America.

European organic food sales increased by 9% to AFRICA €21.5 billion in 2011. Germany accounts for 30% Africa is a continent of mass small-scale organic of sales, with France, the UK and Italy responsible production, with more than half a million producers for a further third. The highest per capita consumption farming just 1.1 million ha of organic land. Almost is in Scandinavian and Alpine countries, and Denmark all certified organic production goes to the export is the country with the highest organic market share market, particularly the European Union. Internal worldwide: organic products comprise 7.8% of its demand is also developing, especially in Egypt food and drink sales. and in South Africa, which has Africa’s largest organic market. ASIA The Asian market for organic products is growing at a steady rate, as growing awareness of organic Global shares of organic land by region 2011 production methods increases demand. Most sales occur in the more affluent countries, such as Europe North America Asia Japan, South Korea, Taiwan, Hong Kong, Malaysia 29% and Singapore. Japan is the largest market in Asia, 7% 10% followed by China and Korea. Africa Latin America 3% 18% Oceania Most of the organic products sold in these 33% countries are imported from Australasia, Europe and the United States. UK baby food pioneer Source: FiBL-AMI-IFOAM Survey 2013, based on data from government bodies, Organix, for example, saw its sales in Malaysia the private sector and market research companies and Taiwan grow by 26% and 22% respectively in 2012. The company also exported to Thailand and South Korea for the first time.

18 SOIL ASSOCIATION Specialist But UK retailers should suppliers need continue to better support thrive from retailers

In 2013 two strong trends that have come to the organic shoppers want to support UK farmers and fore in 2011-12 are set to intensify. buy locally produced food where possible.

INDEPENDENT SUCCESS FRAGILE PRODUCER CONFIDENCE First, the market share of the multiple retailers A year ago this report highlighted the challenge is likely to slip further as the independent sector of low consumer confidence – a phenomenon that asserts its strength – led by the biggest box schemes affects the whole economy and is not something and larger high-street specialist shops. The major the organic sector alone can overcome. In 2012 retailers now account for only 70% of organic the confidence of organic producers showed signs spending, compared to over 80% a decade ago. of becoming more fragile too. The latest producer survey by Organic Centre Wales (November 2012), SUPPLY SHORTAGES THREATENED found that a fifth of Welsh organic farmers intend Second, there is a danger that UK organic production to leave the sector in the next 12 months and will continue to tail off in the short term, threatening more than two-thirds are considering reverting supply shortages. As the farming section of this to non-organic production within five years. report attests, UK production is stuttering in the face of high input costs, faltering consumer demand, REVIVING THE MARKET unfavourable weather conditions, uncertainties over In a survey of the Soil Association’s top 100 CAP reform and reduced support from major retailers licensees for this report, 37.5% identified price and policy makers. promotions as the most important factor in reviving the organic market. They know that in the current The march of independent retail is slowly but surely market, the cost-conscious consumer needs a bringing the UK into line with the rest of Europe, helping hand. But this kind of activity does not where specialist shops and chains generally account come cheap and cannot go on forever. for a higher proportion of the organic market. It is good news for most producers to see a more equal Some major processors report having to spend balance between independent and multiple sales. eye-watering amounts on price promotions just to retain supermarket shelf space – and with it the SIGNS OF REVIVAL all-important capacity to protect and increase sales. It is not good news, however, to see the extent The retailers with the biggest shares of the organic to which some major retailers are reducing and market will need to do more to promote organic sidelining their organic offering – and the negative products and communicate their benefits if they impact this is having on producer confidence and are to play a fuller part in halting the slide in organic UK production. sales. It is in their interest to do so, both to protect their UK organic supply base and to retain the coveted The promising signs of revival in consumer demand and typically higher-spending organic shopper. in some sectors – especially organic dairy products and vegetables – are in danger of being snuffed out MIXED PREDICTIONS without a reliable UK supply base. While imports Among the four biggest organic retailers both Tesco can fill the gap for a while, the committed core of and Sainsbury’s are predicting a fall in sales in 2013,

O R G A N I C M A R K E T REPOR T 2 0 13 19 while Waitrose and Ocado are predicting growth. Recipe for revival It is encouraging to see Tesco’s recent investment in trialling an organic home delivery scheme in London Restoring growth in the organic market will and adding a new organic shopping zone to its require significant support from the Government website – developments that suggest a renewed and commitment from all the links in the focus on catering for the committed consumer. supply chain.

A GLOBAL PERSPECTIVE CONSUMERS Against an uncertain background in the UK there Organic shoppers can go the extra mile to is encouraging news in the continuing growth support their local organic shops and producers, of organic food sales elsewhere in Europe and and look online for organic products when they in North America. This growth shows no sign of are not locally available. The message in these abating, and indicates that the long-term prospects challenging times is ‘use me or lose me’: smaller for the organic market in the UK should also be local retailers and producers need committed good. It is hard to anticipate when the UK market consumers to survive. will return to growth, but less difficult to predict that it will surely do so. The new wave of interest RETAILERS in ethical shopping among young consumers has Retailers can invest more in their own-label the potential to lead the organic revival. organic ranges and in promoting organic products in store. Where possible they can make a good To hasten market growth, it is instructive to look at range of organic products available and prominent how things are done differently in the rest of Europe. online. They need to work more closely than ever A strong and diverse independent sector is part of with their organic suppliers to deliver sustainable the picture, but the prevailing food culture and the returns for farmers, safeguarding a strong UK differing nature of government support are also key production base and with it their future supply. factors that need to be considered and addressed. PROCESSORS AND PRODUCERS GOVERNMENT BACKING NEEDED Organic businesses can continue to communicate Unless or until there is government backing for the organic message, stepping up the use of online sourcing organic products and communicating the marketing and social media to tell the story behind benefits of organic to the public, the onus will be their brands and create a buzz around organic on the organic industry to continue to do what it products. Research shows that family and friends can to promote its message and change consumer are more likely to influence consumer behaviour attitudes to food over time – a challenging task in than advertising or media coverage, and social a faltering economy. media can help to leverage this power.

To cut through consumer confusion, marketing Where possible producers can invest more in messages need to tell a distinctive but simple story direct sales, backed by a web presence that caters that positions organic as the natural, common-sense, for the particular enthusiasm of organic consumers value-for-money choice. to buy online.

20 SOIL ASSOCIATION Sales in Europe and the US show no sign Governments of slowing – need to develop good news for new organic the long-term action plans

GOVERNMENTS Governments in London, Cardiff and Belfast ORGANIC MARKET REPORT 2013 can follow the lead of the Scottish Government Researched and written by Martin Cottingham (independent researcher and writer). and develop new organic action plans – changing times demand innovative approaches. It is high The author and the Soil Association would like to thank all those who completed survey questionnaires, provided time our politicians looked long and hard at how information or granted interviews. We are particularly the organic sector is supported in continental grateful to the following companies, organisations and Europe, particularly Scandinavia, through a individuals for their input and contributions. combination of environmentally based producer The organic consumer support, firm targets for public-sector procurement Main research, data and insights – Kantar Worldpanel (Chris Cowan and Charles Moseley). Additional material from and investment in promoting organic products. Leapfrog Research/Organic Naturally Different Campaign UK organic producers are crying out for our policy (Catherine Fookes) and Planet Organic (Peter Marsh).

makers to show the kind of leadership that has The UK organic market been demonstrated by their continental Multiple retail and product category data/insights mainly counterparts. from Kantar Worldpanel. Independent retail data mainly from Soil Association research. Information for individual multiple retailers from Michelle Rowley (Tesco), Will Ingham (Co-operative), Tom Harvey (Marks and Spencer), Lucy Fry (Ocado), Philippa Hadfield (Morrisons), Grace Castle (Sainsbury’s) and Rachael Craven (Waitrose). Additional input from Warren Anderson (McDonald’s), Mike Bond (Soil Association), Marcus Bruegel (GOTS), Rob Haward (Riverford), Pauline Hili (Natural Products Factory), Rachel McFarlane (Abel & Cole), Nicola Nolan (Neals Yard Remedies), Maarten van Perlo (Soil Association), Loredana Spiezia (Inlight), Mariusz Stochaj (Continental Clothing), Georgina Thomas (Soil Association) and Abi Weeds (Essential Care).

Organic farming in the UK Land area, producer numbers and conversion – Defra statistics; arable – Andrew Trump (Organic Arable); horticulture – Ben Raskin (Soil Association); livestock – Stuart Vile (Meadow Quality) and Tim Finney (Eastbrook Organic Meats); poultry – Andrew Maunder (Two Sisters); eggs – John Sayer (Stonegate); milk – Karl Burkitt (Organic Milk Suppliers’ Co-operative); aquaculture – Alex Macinnes (Aquascot); national trends – England; Martin Davies (Soil Association), Northern Ireland: Albert Johnston (DARD), Scotland – David Michie (Scottish Agricultural College), Wales – Tony Little (Organic Centre Wales).

The global context Helga Willer (FiBL)

Other Soil Association input Holly Black, Helen Browning, Finn Cottle, Rosie Farthing, Emma Hockridge, Lee Holdstock, Georgina McLeod, Emma Rose, Rob Sexton, James Twine.

20 SOIL ASSOCIATION O R G A N I C M A R K E T REPOR T 2 0 13 21 Soil Association trade support

The Soil Association is committed to helping get For more information about trade support services the UK organic market back to growth and working please contact: with businesses across the sector to achieve success. C hief Executive, Soil Association Certification Its activities include: Rob Sexton ([email protected]) Lobbying government and the retailers on behalf M eat, fish & poultry of organic consumers and businesses to invest Jim Twine ([email protected]) in organic production and products D airy Supporting market development by bringing Finn Cottle ([email protected]) together all the links in the supply chain and G rocery leading initiatives such as the Food for Life Lee Holdstock ([email protected]) Catering Mark Fresh produce Organising Organic September and other Dr Phil Morley ([email protected]) marketing events to provide opportunities for T extiles organic businesses and retailers to work together Georgina Thomas ([email protected]) in promoting organic products C atering Staging the annual Organic Food Awards and Mike Bond ([email protected]) supporting the organic categories in the Natural H ealth & beauty and Organic Products Awards to highlight Maarten van Perlo outstanding products and recognise enterprise ([email protected]) Staging ‘meet the buyer’ events with retailers to enable producers and their products to reach a wider market Organising regular trade briefings to share the latest news and market data with leading companies in the organic market, supporting well informed and effective marketing of organic products Providing a series of learning and networking events for organic farmers, growers and newcomers to the industry, facilitating the sharing of best practice Publishing Living Earth and Organic Farming, leading magazines for organic consumers and producers respectively Providing dedicated business development support across all sectors to help market development, including specialist advice on export opportunities.

22 SOIL ASSOCIATION O R G A N I C M A R K E T REPOR T 2 0 13 23 O R G A N I C M A R K E T REPOR T 2 0 13 23